Magazine Article | March 5, 2014

Extracting the Value From Outsourcing By Applying Best Outsourcing Practices

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By Gregory Fiore, M.D., founder, SSI Strategy

By its very nature, outsourcing can be a double-edged sword. On one hand you could consider outsourcing as an approach to increase your geographic reach, retain organizational flexibility or a smaller footprint, or achieve some other business goal. On the other hand, such opportunity comes with a bit of risk, such as unexpected cost overruns or poor quality of service. In the most extreme circumstances, patient safety may be put at risk or data integrity compromised to the extent that work needs to be repeated and clinical timelines can be stretched. To unlock the true value of outsourcing while minimizing the risks simply requires you to pay attention to best practice learnings from the legions of outsourced projects that came before yours. Most importantly, proactively structure the outsourced arrangement in such a way as to optimize value and minimize headaches. The following are three best practices that all sponsors should employ to increase the likelihood of success in outsourcing.

1. Ensure the operations team is involved in procuring services and drafting the agreement.
Often we have seen a procurement team struggle to translate input from the operations team to the vendor; fail to reengage operations during discussions, even as terms and activities morph from original requirements; and throw the relationship (not even the agreement) over the wall to operations to struggle with. Involving the operations team also will allow the agreement to define the correct metrics and tracking mechanism as well as ensure there is clear understanding of both the intent and wording of agreement.

2. Select the best-fit vendor, and then treat it like a partner.
It is important for the sponsor to be realistic about their needs and about who will be a good fit for outsourcing. If budget is a top priority, which is commonly the case, then tradeoffs will be required for certain services, infrastructure, or other components. Once a sponsor has made a realistic selection of the best-fit vendor, the mindset needs to be 100 percent in the direction of partnership (assuming the nature of the services is amenable). Problems need to be solved together, and there is no place for blame. Our view is that there is no perfect vendor, just as there is no perfect team member. What is most important is that the needed skills are present, the spirit and philosophy of the firms are aligned, costs are reasonable, and communication is open.

3. Invest in the relationship.
Another significant mistake is to imagine that an outsourced service provider can do the job alone, except in very limited circumstances. Outsourced activities of any magnitude need directed oversight from the sponsor in the form of an assigned individual or oversight body.

A formal overseer or oversight group can track operational and performance metrics to be sure that expectations are being met from both sides. Proactive monitoring of performance allows for early detection of potential risks (e.g. attrition, need for retraining, additional time spent on an activity, etc.). Additionally, the forum provides an excellent mechanism for the vendor to communicate any suggestions for process improvements that the sponsor should consider. When communication is not forced in this way, both sides tend to stay quiet unless there is an urgent need to speak. Opportunities for program optimization are lost.

If this is so easy, then why is outsourcing complicated?
Outsourcing becomes complex when the sponsor is too busy or inexperienced to properly engage its vendors. In these cases, consideration should be given to working with a third-party advisor or external group to assist the outsourcing effort. When doing so, it is necessary to remember that these firms are also vendors, and best results come from following the same best practice approach with them. Working with an advisor that understands your business and working with them over time affords the best results.

Treating outsourcing as a strategic initiative and following the approaches outlined above will increase the likelihood of success.

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